Poloniex Set to Repay Flash Crash Losses, Victims Are Not Happy

Some traders on the Poloniex owned crypto Margin trading platform lost a lot of money towards the end of May 2019, when the value of a less popular crypto asset —CLAM experienced an unexpected sharp crash. This led to the overall loss of approximately 1,800 Bitcoins (BTC).

While trying to make things right for the second time, Poloniex recently stated that it will begin to recover the losses of the margin traders in August. The exchange will kick off the trading fee holiday by crediting the affected users with the trading fees which they have incurred since July 6, adding that the users in question “will see a repayment tracker in your account soon.”

This initial step of recourse on the exchange’s part came on June 14, after the firm revealed that it had distributed 180.73606744 BTC proportionately across affected lenders.

The value of CLAM started receding on the 26th of May at about 20:15 UTC, it started going down from around 19.40 dollars, and after just two hours, the price of the digital asset had reduced by almost 80%. This kind of event of which the price of an asset drops very fast within a very short period of time is referred to as a flash crash.

Also, this flash crash experienced by CLAM led to the loss of money which belonged to margin lenders who put up a portion of their BTC for margin traders who then borrow and pay back with interest. Poloniex has a lending pool in which it sums up funds put up by lenders so as to meet up with orders from margin traders.

Furthermore, Poloniex stated that the loss to the lending pool was as a result of the CLAM market not having enough liquidity to enable the automatic liquidation of CLAM margin positions when the market was dropping at a very fast rate.It then added that a vital portion of the total CLAM margin positions was collateralized in CLAM itself, that is, the prices of both the margin positions and the collateral were dropping simultaneously.